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Summary
AI is pushing capitalism into uncharted territory in ways no tech revolution has done before. It could alter how output is generated, resources are allocated and the ratio of what capital and labour earn. Let’s not get blindsided by it.
Two centuries and a half ago, Adam Smith used the example of a pin factory in The Wealth of Nations to explain how capitalism uses division of labour to boost productivity by splitting production into specialized tasks done by workers paid to work in close coordination for efficiency.
But what happens to this model if AI agents run factories and companies?
Andon Labs, a US-based startup, runs a cafe where tasks like inventory control, hiring, scheduling and operations are supervised by Mona, an AI agent powered by Google Gemini, even as human baristas brew and serve coffee. Anthropic’s Claude Sonnet 3.7, OpenClaw artifacts and other tools have also shown an ability to run businesses.
How long before complex firms turn CEO roles over to artificial intelligence (AI)? Could AI-run startups emerge? And if Agentic AI systems designed to optimize resources find human behaviour hard to grasp, would they opt for fellow machines that do not tire, let alone unionize, seek meaning in their jobs and demand a work-life balance?
Clearly, capitalism is headed for uncharted territory.
It is not just pricing, procurement, logistics, hiring and advertising that AI could take over, but capital allocation too. Zoom out, and that logic can apply to how capital markets allot funds.
Algorithmic trading has been around for years. Despite differing systems at play, they often act in sync—as we saw in the US ‘flash crash’ of 2010. Rival algorithms can respond in unison to the same signals. That is also why ride-hailing services are found to mirror each other.
Markets, however, are supposed to thrive on diverse views; humans disagree, speculate, make irrational bets, invest on emotional cues and succumb to fear or greed. Consumers behave all too human too. So, are we staring at a future of people being force-fit into a framework of digital templates?
At this juncture, all we can count on is hyper-efficiency. With business operations stripped of slack by AI, optimists expect output per worker to soar.
While new jobs will surely be generated, it could spell a scenario in which capital dominates labour so thoroughly as a factor of production that the state will need to intervene in the latter’s favour. This is less of an anxiety in India than in the tech-suffused West, where fears have arisen of an industrial compact being broken.
Since the time of Henry Ford’s assembly line that gave productivity a leap, capitalism has sought to create demand by paying people enough to buy all that it churns out. Should AI enrich business shareholders and push salaried folks out of jobs, many reckon, overall demand would have to be sustained by a redistributive policy that taxes capital heavily to fund a universal basic income.
So far, regulatory talk has focused on AI safety, given how agentic systems left to their own devices could blunder or go rogue. Soon, social safety nets may need policy-level attention.
The jury is out on how well an AI-optimized free market will serve society, which, let’s be clear, is why capitalism exists in the first place. Efficiency is a worthy aim, but its gains are finite, and while AI can be ‘inventive,’ it’s doubtful if it can create value from true originality. It takes intuition, curiosity, obsession and more; think of the out-of-the-box ideas of Steve Jobs at Apple.
It takes leaps of thought that are not yet documented; think of Archimedes, who said he could move the world with a lever that’s long enough and a place to stand. In short, it takes imagination, without which capitalism would be too dreary to uplift human lives.
English (US) ·